9. Intangibles

Journey

Agreement with Vyne Therapeutics Inc.

On January 12, 2022, Journey entered into an agreement with Vyne Therapeutics Inc. (“Vyne”) to acquire two FDA-approved topical minocycline products, Amzeeq® (minocycline) topical foam, 4%, and Zilxi® (minocycline) topical foam, 1.5%, and a Molecule Stabilizing Technology™ proprietary platform from Vyne for an upfront payment of $20.0 million and an additional $5.0 million payment on the one year anniversary of the closing (the “Vyne APA”), which was paid in January 2023. This expanded Journey’s commercial portfolio to eight marketed branded dermatology products. Journey also acquired the associated inventory related to the products.

The Vyne APA also provides for contingent net sales milestone payments, on a product-by-product basis. In the first calendar year in which annual net sales reach each of $100 million, $200 million, $300 million, $400 million and $500 million, Journey is required to make a one-time payment of $10 million, $20 million, $30 million, $40 million and $50 million, respectively, in that year only, per product, totaling up to $450 million. In addition, Journey will pay Vyne 10% of any upfront payment received by Journey from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the Vyne APA.

The following table summarizes the aggregate consideration transferred for the assets acquired by Journey in connection with the Vyne APA:

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The fair value of the deferred cash payment is being accreted to the $5.0 million January 2023 cash payment over a one-year period through interest expense. The deferred cash payment had a carrying value of $5.0 million in the Company’s consolidated balance sheets at December 31, 2022, and was paid to Vyne on January 12, 2023.

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The following table summarizes the assets acquired in the Vyne Product Acquisition Agreement:

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The intangible assets were valued using an income approach, while the inventory was valued using a final sales value less cost to dispose approach.

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On March 31, 2021, Journey executed an Asset Purchase Agreement (the “Qbrexza APA”) with Dermira, Inc. a subsidiary of Eli Lilly and Company (“Dermira”). Pursuant to the terms of the agreement, Journey acquired global rights to Qbrexza® (glycoprronium), a prescription cloth towelette to treat primary axillary hyperhidrosis in patients nine years of age or older. Journey paid an upfront fee of $12.5 million to Dermira. In addition, Journey is obligated to pay Dermira up to $144 million in the aggregate upon the achievement of certain sales milestones. The royalty structure for the agreement is tiered with royalties for the first two years ranging from approximately 40% to 30%. Thereafter for a period of eight years royalties are approximately 12.0% to 19.0%. Royalty amounts are subject to 50% diminution in the event of loss of exclusivity due to generic competition.

Upon closing of the Qbrexza® purchase on May 13, 2021, Journey was substituted for Dermira as the plaintiff in U.S. patent litigation commenced by Dermira on October 21, 2020 in the U.S. District Court of Delaware (the “Patent Litigation”) against Perrigo Pharma International DAC (“Perrigo”) alleging infringement of certain patents covering Qbrexza® (the “Qbrexza® Patents”), which are included among the proprietary rights to Qbrexza®. The Patent Litigation was initiated following the submission by Perrigo, in accordance with the procedures set out in the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), of an Abbreviated New Drug Application (“ANDA”). The ANDA sought approval to market a generic version of Qbrexza® prior to the expiration of the Qbrexza® Patents and alleged that the Qbrexza® Patents were invalid. Perrigo was subject to a 30-month stay preventing it from selling a generic version, but that stay was set to expire on March 9, 2023. As of December 31, 2022, the Patent Litigation was settled by and between the parties and the case subsequently has been dismissed. Pursuant to the terms of the settlement agreement, Padagis is prohibited from launching its generic to Qbrexza, under its ANDA or otherwise, until August 15, 2030.

The purchase price of $12.5 million included the asset Qbrexza as well as finished goods and raw material inventory. Journey also has the obligation to accept any product returns related to sales made by Dermira. Journey allocated the upfront payment to inventory since the fair value of the inventory and Qbrexza rights exceeded the purchase price. The future contingent milestone payments, if achieved, will be recorded to intangible asset and amortized over the seven-year life of the asset commencing on the closing date.

The table below provides a summary of intangible assets as of December 31, 2022 and 2021, respectively:

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Intangible asset activity for the years ended December 31, 2022 and 2021:

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The future amortization of these intangible assets is as follows:

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